Opportunity Zones Aren’t Perfect, But New Reforms Should Help

ByRahul Roy

Opportunity zones have many advantages, such as deferring taxes or avoiding paying capital taxes. This program benefits low-income communities by developing them and making them catch the eyes of investors. However, opportunity zones still need a lot of improvement as they are yet to be perfect.

Luckily reforms to this program have started to be done to make its horizon. But even though reforms are needed, most investors feel that the big picture of the OZ is purposely positive. Here are some of the cons whose reforms are yet to be placed;

Here are some of the cons and the reforms placed;

Lack of transparency and reporting

Wealthy investors have been allowed into the program, and they avoid taxes without fulfilling the legislation’s purpose. In 2019, around 18,000 taxpayers invested in the opportunity zones, funded 6,000 qualified, and invested $29 billion in properties. According to GAO, some of these projects would have been accomplished without tax incentives. 

They investigate to see the effects of the OZ funds. As a result, legislation with a bipartisan group consisting of senators was introduced to make some reforms. This group banned OZ from investing in Casinos, luxury apartments, and stadiums. The reforms ensured that only low-income communities got the program’s advantages. 

Not all Opportunity Zones were selected based on the greatest need

While states were choosing the neighborhoods that would benefit the most from QOZ, some did their research well, selecting the best candidates. Others seemed to take that chance as a windfall for developers. 

They made reforms to ensure the states did their research as needed. In addition, city officials and community leaders are expected to ensure that investments are distributed fairly. Although some reforms have been implemented to improve OZ’s experience, those issues still need to be examined. Here are some of the cons whose reforms are yet to be placed;

Illiquidity

To experience the full benefits of OZ, you must hold your investment for ten years. Unfortunately, it’s difficult to predict how the investment will be ten years later. This makes it challenging to compare OZ with other long-term investments. If misfortune happens before the end of these ten years, and you need QOZ to take care of it, you will not be helped. 

Uncertainty

Although some regulations were released, adding to reassurance, there is still uncertainty. This includes;

  • There is no way we can determine the rate of taxes in 2026.
  • What will be the state of real estate in the next ten years?
  • What changes will happen to the regulations?

Opportunity Zones motivate more investments in low-income areas and are accompanied by other advantages. Although QOZ offers some excellent benefits, they must balance them with the negatives. In addition, they need to deal with the uncertainties of the program. You may be tempted to take a negative stance on opportunity zones, but you should not. This program is still young and just like any other successful program, it will take time before it becomes perfectly reformed.

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